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Prepare a Cost Formula

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Jo builds and sells robots using component parts purchased from a supplier and assembled and painted in Jo's factory. The boats sell for $1,200 each. Component parts cost $400 per boat, and each boat requires 12 labor hours to assemble at a cost of $14 per hour. Jo's factory is rented for $2,000 per month, which includes utilities. Jo receives a salary of $3,000 per month. The boats are sold by outside sales representatives who receive a 5% sales commission. 80 boats were produced and 75 sold during 2011. Prepare a cost formula to estimate Jo's cost of production, and define your variables and constants.

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This solution illustrates how to prepare a cost formula.

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Let x=number of units sold , s=sales revenue per unit, v=variable costs per unit, f=fixed costs, and p=net ...

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